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International Business Review

Finance–Specific Factors as Drivers of Cross–Border Investment – An Empirical Investigation

Journal Article
Reference
Forssbæck, Jens and Lars Oxelheim (2008). “Finance–Specific Factors as Drivers of Cross–Border Investment – An Empirical Investigation”. International Business Review 17(6), 630–641. doi.org/10.1016/j.ibusrev.2008.09.001

Authors
Jens Forssbæck, Lars Oxelheim

In this paper we empirically test the role of firm-specific financial characteristics as drivers of international investment and production. We hypothesize that financial strength generates advantages that can be exploited through cross-border investment activity. The hypothesis is tested in a series of binary-response models, using a sample of 1379 European non-financial firms’ international acquisitions. Controlling for traditional firm- and target-country-specific foreign direct investment (FDI) determinants, we find strong evidence that financial factors play a significant role in explaining cross-border investment. We conclude that without explicit consideration of the financial dimension, firms’ FDI decisions cannot be properly understood.

Lars Oxelheim

+46 (0)8 665 4527
+46 (0)70 861 9361
lars.oxelheim@ifn.se